VSS Fund Management and its managing partner, Jeffrey T. Stevenson, will pay $200,000 total to settle claims that the firm failed to disclose an increase in the valuation of one of its funds to the funds' limited partners while Mr. Stevenson was in the process of purchasing the LP interests, the SEC announced.
In April 2015, several limited partners expressed a desire for a liquidity option that would allow them to exit VS&A Communications Partners III, a VSS fund that was in its 17th year at the time. While the VSS investment committee decided to dissolve the fund through a distribution in-kind, VSS presented the limited partners with an option to sell their interests to Mr. Stevenson for cash at a price based on 100% of the fund's December 2014 audited net asset value, according to the Securities and Exchange Commission announcement Sept. 7.
But in May 2015, VSS decided not to close the fund in order to the give limited partners who wanted to remain in the fund the option to do so. At the same time, VSS revised the offer presented to the limited partners stating Mr. Stevenson would purchase their interests, rather than their in-kind interests, at the same price offered in April, the SEC said.
Prior to making the revised offer, VSS and Mr. Stevenson received preliminary information indicating the fund's NAV had potentially increased significantly during the first quarter of 2015, which VSS and Mr. Stevenson neglected to disclose to the limited partners, according to the SEC.
"The omission of this information regarding the potential increase in the value of (the fund's) portfolio companies resulted in certain statements in VSS' May letter being misleading," the SEC said. "In addition, after the offer was made, VSS did not provide the remaining (fund) limited partners with the first-quarter 2015 financial information, which, according to VSS' calculations, still showed an increase in (the fund's) NAV."
VSS did not admit to or deny any of the SEC's findings. In a statement, VSS said it is pleased to have reached a resolution with SEC "and to put this inquiry behind us." It added, "VSS is committed to upholding the highest standards in all that we do, and we remain dedicated to continually enhancing our practices."
VSS had about $767 million in regulatory assets under management as of Dec. 31.